Thursday, May 10, 2012

The Road to San Jose for A's Keeps Getting Longer

You gotta stay organized.

One may recall that last year, San Jose created an opportunity for A's owner Lew Wolff to not only help the city acquire needed parcels for a downtown ballpark, but also gain control of critical revenue-generating property (the parking garage) underneath his Fairmont Hotel. The whole situation was enormously stacked in Wolff's favor. However, he submitted a bid for two parcels at once and was disqualified for this as it did not follow the rules.

The situation is similar with respect to San Jose's transfer of then-redevelopment agency (RDA) assets to a RDA-esque entity the Diridion Area Development Authority. This move, which shielded the incomplete set of land that the city has acquired for a potential A's ballpark, is under heavy fire by the state which believes the move may have been illegal. The state is seeking to clawback land transferred in such a manner by cities across the state. The one exception was for land encumbered by contractual agreements. This land seemingly just so happens to have such an agreement in place. In November 2011, the A's and the city entered into an option agreement for the parcels the city has cobbled together. Remember how I mentioned that you have to stay organized? Well, per the state, contractual agreements on land prior to June 28, 2011 were exempt from clawback. Way to mark the calendars.

Meanwhile, up 880 in Oakland, the city is under similar scrutiny for the serious budget shenanigans regarding the Henry Kaiser Convention Center and the $3.5 million being committed to an environmental impact review study for the proposed "Coliseum City" concept.

Both cities had to be creative to shield assets and funds from the long arm of the state. However, both Oakland and San Jose could have paid closer attention to the calendar and avoided some of this scrutiny.

Cause for Concern

In terms of the A's, the San Jose situation is far more worrying. First, the city has to win in court against the state. The timeline for the case to even begin could be more six months per today's issue of The Wall Street Journal. This puts us at around the beginning of October, assuming the clock started today. Trials do not last a day either, so tack on a few more months and a ballpark project is now pushed out nine months. In this span the A's could, in theory, approach remaining landowners around the in-limbo city land with offers for their property. However, the team has shown no movement in this direction despite promises.

If the city loses, it is anyone's guess as to what happens to those assets now under state control.

Assuming the city prevails, nine months puts us at the end of the current season and the end of the team's lease in Oakland. Yikes. The very favorable terms the team currently enjoys might not be offered again given the moving vans ownership has perpetually on standby. However, the team needs a venue as the actual construction of the stadium (absent CEQA lawsuits) will take upwards of three years.

That is three years from the point where San Jose has not only won against the state but also has floated and passed a referendum on spending public money on stadium related activities (an action deemed necessary by city attorney Rick Doyle) and this assumes a relatively quick surrender by the Giants of their territorial rights for Santa Clara County. (A proposition that will likely involve a high up-front cash payment to the Giants or a guarantee of revenue, meaning direct payments should the G-men's revenue drop below a certain level.)

Now we are four years out. The issue now becomes the league's CBA. The 2016 season is the end, barring an extension, of revenue sharing funds for the team. It is highly conceivable that no stadium could be built by this time and that the team's moneyed owners would be forced to take on an extra $25-$30 million in expenses until such time that a new stadium opens in San Jose, and assuming that it generates the anticipated revenue.

Looking Forward

Look, it is not that Oakland and Alameda County have either the means or the willingness to even partially fund a new stadium. What the city and the county do have is -- again in their assessment -- land at the Coliseum that can be developed more quickly (all the land is there, being already a sports complex removes numerous planning and zoning issues, the territory is unequivocally the A's, the city does not need a ballot referendum) and potentially at a lower cost to develop (no need to acquire parcels from private landowners, no need to compensate the Giants). Oakland also has better (until, and if, BART finally comes to Diridon station) public transportation options for fans.

Like it or not, the revenue may be lower in Oakland (a virtually unverifiable position to assume), but the costs are higher for a San Jose stadium and the procedural hoops keep getting more and more elaborate. The longer the clock ticks without action, the worse the situation gets. Of course, Oakland's biggest stumbling block is an ownership group that has no interest in staying on the city. (Kind of makes you wonder why those road "Oakland" unis haven't been banished.)